Chapter 7-9 Vocab Flashcards
Refers to a governments approach toward its own spending and taxation
fiscal policy
the difference between net tax revenues and government spending
Governments budget balance
total tax revenue received by the government less transfer payments
net tax revenue
net tax revenue in excess of government spending on goods and services (positive Balance)
Budget surplus
government spending on goods and services in excess of net tax revenues (negative balance)
Budget deficit
the sum of the federal governments budget deficit less its surplus (add up all deficit flows over the years then subtract the sum of all surplus over the same time)
national debt (public debt)
net tax revenues equal government spending on goods and services
balanced budget
when government borrows from its central bank to finance increased spending
monetizing the debt
deliberate adjustments in the level of government spending and taxation in order to close recessionary or inflationary gaps
countercyclical fiscal policy
the belief that a governments budget should be balanced in each period
balanced-budget fiscal policy
provisions of tax laws and government spending programs that automatically take spending out of the economy when it is booming and put spending in when it is slowing down
automatic stabilizers
action by gov that tends to push the economy in the same direction it is leaning in
procylical
the use of countercyclical fiscal policy to balance the budget over the life of the business cycle
cyclically balanced budget fiscal policy
something that is accepted as payment for goods and services
medium of exchange
the function of money that allows people to hold and accumulate wealth
store of wealth
the function of money that allows us to determine easily the relative value of goods
unit of account
anything that is declared as money by gov order
fiat money
a type of money that can also usefully function as a commodity
commodity money
a banking system in which banks keep only a small fraction of their total deposits on reserve in the form of cash
fractional reserve system
anything that is widely accepted as a medium of exchange and therefore can be used to buy goods or to settle debts
money
currency in circulation plus demand deposits
M1
money deposited in a chequing account which is available on demand
demand deposits
money deposited in a saving account which is available only after notice is given
notice deposit
all notice and personal term deposits
M2
non-personal term deposits known as cerficates of deposit
M3
financial institutions, such as credit unions or trust companies, that share many of the functions of commercial banks but are not defined as banks under the bank act (also known as nonbank financial intermediaries)
near-banks
the difference between the rate of interest a bank charges borrowers and the rate it pays savers
spread
the portion of deposits that a bank wants to hold in cash
target reserve ratio
the part of a company s balance sheet that represents what it owns or what is owed to it
assets
the part of a company’s balance sheet that represents what is owes
liabilitis
the total assets less total liabilities of a company (equity)
Net worth
reserves in excess of what the bank wants to hols as its target reserve
excess reserve
the increase in total deposits that occur in the whole banking system as a result of a new deposit in a single bank
money multiplier
the rate of interest that the bank of canada chargers a commercial bank for a loan
bank rate
the annual rate at which payment it made for the use of money(or borrowed funds) a % of the borrowed amount
interest rate
the desire of people to hold money as a medium of exchange, that is, to effect traansaction
transactions demand for money
the desire of people to use money as a store of wealth, that is, to hold money as an asset
asset demand for money
policy designed to change the money supply, credit availability, and interest rates
monetary policy
a(n) ______ in the interest rate is caused by either a rise in the demand for money or a fall in the supply of money
increase
a(n) _______ in the interest rate is caused by either a fall in the demand for money or a rise in the supply of money
decrease
a policy that aims to increase the amount of $ in the economy and make credit cheaper and more easily available
expansionary monetary policy
a policy in which the amount of money in the economy is decreased and credit becomes harder to obtain and more expensive
contractionary monetary policy
the buying and selling of securities by the bank of canada on the open (to public) market
open-market operations
the keynesian view of how changes in money affect the real variables in the economy
transmission process
an economic school of thought that believes that a cyclical fluctuations of GDP and inflation are usually caused by changes in the money supply
monetarism
a formula that states that the quantity of money times the velocity of money is equal to nominal GDP (price x real GDP)
equation of exchange
the number of times per year that the average unit of currency is spent (or turns over) buying final goods or services
velocity of money (or circulation)
the interest rate that commercial banks charge one another on overnight loans
overnight interest rate
the bank of canadas key policy interest rate: it is the midpoint of the banks 50-basis-point operating band
target for the overnight rate
the rate of interest payable by the commercial banks on loans from the bank of canada
bank rate
